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INCOME TAXES | 12 Months Ended
--- | ---
Sep. 30, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company’s income from continuing operations before income taxes includes the following components for the periods shown below (in millions):
| Fiscal Years Ended September 30,
| 2024 |  | 2023 |  | 2022
United States | $ | 1,800 |  |  | $ | 1,413 |  |  | $ | 882 |
Foreign | 415 |  |  | 303 |  |  | 245 |
| $ | 2,215 |  |  | $ | 1,716 |  |  | $ | 1,127 |
The Company’s income tax provision (benefit) on income from continuing operations consists of the following for the periods shown below (in millions):
| Fiscal Years Ended September 30,
| 2024 |  | 2023 |  | 2022
Current |  |  |  |  |
Federal | $ | 354 |  |  | $ | 276 |  |  | $ | 194 |
State | 38 |  |  | 41 |  |  | 27 |
Foreign | 98 |  |  | 97 |  |  | 62 |
| 490 |  |  | 414 |  |  | 283 |
Deferred |  |  |  |  |
Federal | (6) |  |  | 28 |  |  | (17) |
State | 7 |  |  | 11 |  |  | (8) |
Foreign | 9 |  |  | (36) |  |  | 3 |
| 10 |  |  | 3 |  |  | (22) |
| $ | 500 |  |  | $ | 417 |  |  | $ | 261 |
A reconciliation of the federal statutory income tax rate to the effective income tax rate for the periods shown below is as follows:
| Fiscal Years Ended September 30,
| 2024 |  | 2023 |  | 2022
Federal statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Changes in valuation allowances impacting results | 4.0 | % |  | 5.3 | % |  | 5.5 | %
State and local income taxes, net of federal benefit | 1.3 | % |  | 1.7 | % |  | 0.1 | %
Federal deemed inclusion amounts | 0.5 | % |  | 0.3 | % |  | 1.5 | %
Withholding taxes | 0.2 | % |  | 0.2 | % |  | 1.2 | %
Provision to return adjustments | 0.1 | % |  | 0.3 | % |  | (1.0) | %
Foreign-derived intangible income | (1.2) | % |  | (1.2) | % |  | (2.0) | %
Stock-based compensation | (3.6) | % |  | (2.3) | % |  | (2.8) | %
Other—net | 0.3 | % |  | (1.0) | % |  | (0.3) | %
Effective income tax rate | 22.6 | % |  | 24.3 | % |  | 23.2 | %
The components of the deferred taxes consist of the following (in millions):
| September 30, 2024 |  | September 30, 2023
Deferred tax assets (liabilities): |  |  |
Intangible assets | $ | (1,008) |  |  | $ | (852) |
Property, plant and equipment | (101) |  |  | (82) |
Interest rate swaps, caps and collars | (8) |  |  | (47) |
Interest expense limitation | 279 |  |  | 190 |
Employee benefits | 115 |  |  | 103 |
Inventories | 90 |  |  | 89 |
Capitalized research and development costs | 73 |  |  | 52 |
Net operating losses | 52 |  |  | 66 |
Loss contract reserves | 33 |  |  | 36 |
Environmental reserves | 10 |  |  | 10 |
U.S. income tax credits | 7 |  |  | 25 |
Product warranty reserves | 7 |  |  | 6 |
Non-U.S. income tax credits | 3 |  |  | 9 |
Other | — |  |  | (5) |
Total | (448) |  |  | (400) |
Add: Valuation allowance | (318) |  |  | (227) |
Total net deferred tax assets (liabilities) | $ | (766) |  |  | $ | (627) |
At September 30, 2024, the Company has state net operating loss carryforwards of approximately $816 million, German net operating loss carryforwards of $54 million and United Kingdom net operating loss carryforwards of approximately $65 million that expire in various fiscal years from 2025 to 2044. The Company has U.S. and non-U.S. tax credit carryforwards of $10 million that expire beginning in fiscal year 2025. The deferred tax assets for the interest expense limitation, net operating losses, and tax credit carryforwards are reduced by a valuation allowance for the amount of such assets that the Company believes will not be realized. With limited exception, no provision has been made for income taxes on undistributed earnings of foreign subsidiaries of approximately, $40 million at September 30, 2024, since it is the Company’s intention to indefinitely reinvest such undistributed earnings. The cash that is permanently reinvested is typically used to expand operations either organically or through acquisitions. It is not practicable to estimate the additional taxes that would be payable on the remittance of such earnings. We have provided for taxes in jurisdictions in which we are not considered indefinitely reinvested, however, such amounts are not significant. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations for years before fiscal 2018. The Company is currently under examination for its federal income taxes in Canada for fiscal years 2013 through 2019, in France for fiscal years 2020 through 2022, and in Germany for fiscal years 2017 through 2019. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| 2024 |  | 2023
Balance at October 1 | $ | 17 |  |  | $ | 17 |
Additions based on tax positions related to the prior year | 1 |  |  | 4 |
Additions based on tax positions related to the current year | — |  |  | — |
Reductions based on tax positions related to the prior year | — |  |  | — |
Settlement with tax authorities | (3) |  |  | (3) |
Lapse in statute of limitations | (1) |  |  | (1) |
Balance at September 30 | $ | 14 |  |  | $ | 17 |
Unrecognized tax benefits at September 30, 2024 and 2023, the recognition of which would have an effect on the effective tax rate for each fiscal year, amounted to $14 million and $17 million, respectively. The Company classifies all income tax-related interest and penalties as income tax expense, which were not significant for the years ended September 30, 2024 and 2023. As of September 30, 2024 and 2023, the Company accrued $4 million and $6 million, respectively, for the potential payment of interest and penalties. Within the next twelve months, it is reasonably possible that unrecognized tax benefits could be reduced by approximately $2 million resulting from the resolution or closure of tax examinations. Any increase in the amount of unrecognized tax benefits within the next twelve months is not expected to be material.

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